Introduction

The Audit Directive of May 2006 enforces the use of ‘International Standards on Auditing’ (ISA) for all statutory audits to be performed in the EU. Aiming at a consistently high quality for all statutory audits required by Community law, the Audit Directive has given implementing powers to the European Commission to adopt the ISA in accordance with the so-called ‘comitology procedure’. Moreover, the Commission has recently commissioned a Study on ‘The Evaluation of the possible Adoption of International Standards on Auditing (ISA) in the EU’. The object of that Study is to address the incremental direct and indirect costs for EU companies and audit firms, as well as the benefits resulting from the possible adoption by the European Commission of the ISA.

Improving audit quality through the adoption of ISA within the EU has a number of fundamental legal implications that need to be considered in order to comprehensively cover the subject. The following article outlines some of the most important of these issues after an introduction into the genesis of the harmonization process and a brief look at the competence of the EU to adopt ISA.

History of internationalization of auditing standards

From IAG to ISA

Not surprisingly, the harmonization of standards of auditing is closely linked to the harmonization of accounting standards. The historical starting point of international harmonization of financial reporting was in October 1972, when during the tenth international congress of accountants in Sydney the International Coordination Committee for the Accountancy Profession (ICCAP) was founded.